Outsourcing Essentials for Entrepreneurs

Opinions

Date: 16.03.2018

One of the key personality traits of an Entrepreneur is that we like to hustle, try new things, and fill our workday with variety. A negative side-effect of this is that we also have a hard time giving up control.

As an entrepreneur, it is imperative that we learn to delegate certain tasks to others.

Without delegation, the sad truth is that we stall the growth of our companies because there is only so much time, energy, and creative focus we can provide as an individual. By outsourcing certain tasks to others, we open up more of our own resources to focus on generating income.

Let’s dive into the benefits of outsourcing, why today’s economy is primed for an outsourced workforce, which tasks to outsource, which ones to keep in-house, and a step-by-step guide to finding high-quality outsourced talent.

Benefits of Outsourcing

One of the items that keeps entrepreneurs from delegating tasks is that they don’t want to hire a workforce. There is some validity to this position, as a workforce requires quite a few added costs to running a business. Hiring a small team of contractors can be beneficial for the following reasons:

You pay only for what you need — A full-time employee needs about 40 hours of work during the week to stay busy. Sometimes you don’t need someone to spend that much time on an ongoing basis for certain roles. An example of this would be contracting a lawyer when starting out your business. You certainly don’t need (and can’t afford) a full-time in-house lawyer, so working with one on a contract basis makes the most sense.

Skip the payroll & tax headache — Hiring a contractor is relatively straight-forward. You pay them, and tell the IRS about it at the end of the year. They are responsible for filing their own taxes and getting their accounting in order.

No benefits required — Many competitive workplaces offer health care, gym memberships, hardware and software, paid time off, etc. In general, none of these things are offered to outsourced help, nor are they expected to be.

No space needed — Depending on the type of business you are running, hiring a workforce requires larger office space, more desks and equipment, etc. A contractor typically works from their own space, or if they must set up in your offices, only need a temporary workspace.

Forces you to refine processes — When hiring a contractor, you are forced to put certain expectations and processes down for them to follow. When this happens you often are encouraged to streamline processes.

Forces you to prioritize tasks — Deciding which tasks to outsource is a process that forces you to list out the tasks that are best performed by you, and which ones should have less of a priority when it comes to your time.

Of course, these benefits are positioned against hiring out for these same tasks. If you decide to do everything yourself, you avoid the office space, tax issues, etc. However, as mentioned previously, you limit yourself to what 1 person can accomplish. Very few successful entrepreneurs got to where they are now without delegating out certain tasks to free them up to work on the business.

Why Today is the Best Time to Outsource

There used to be a time when people would stay with a single company from initial hire to retirement. This no longer holds true for a lot of professionals. In fact, some professionals view self-employment as the only stable option in today’s economy.

The result? Many more highly-qualified professionals are working as contractors as opposed to sticking it out in the corporate world.

Add this to the fact that it has never been easier to work remotely thanks to modern communication apps:

What to Outsource

Which tasks should you be outsourcing? Coming up with a list of tasks to outsource might seem like a daunting task, but essentially it starts with defining your core competencies as a business, and what you’ve defined as your competitive advantage.

For example, a company such as Apple would never outsource product design…it is what defines them as a company and is one of their key competitive advantages. However, they have outsourced advertising campaigns for these products because advertising is not their key competitive advantage.

Once you define your core competencies as a business, you can start to take note of the tasks that you spend time and energy on, and ask yourself, is my core competency affected if I outsource this?

In most businesses, bookkeeping and legal are not core competencies, so these are usually the first to be outsourced.

Another reason to outsource is if there is a limited-scope task that would benefit from a specialist’s input. For example, you might contract a social media specialist to help set up a plan for social media. Perhaps you’ll meet with this person every three months in order to analyze and improve this strategy, meanwhile a lower-paid contractor is the one implementing this strategy.

There is a role for consultants and freelancers of all levels even with a small business.

What Not to Outsource

Just as there are certain things that you should definitely outsource, there are also items that should most definitely be done in house.

As mentioned previously, anything that is related to your core competencyshould not be outsourced. Anything that gives you a competitive advantage should come from within, otherwise your competition is only a freelancer away from matching or beating that advantage.

You should also not outsource items simply because you do not like doing them. For example, many entrepreneurs are tempted to outsource sales right off the bat because they do not like selling. However, even though sales are uncomfortable, we tend to get better at it with time. In fact, for some entrepreneurs, having sales conversations with potential clients will drive product direction and give a clearer picture of your target audience’s needs and pain points. Yes, there will come a time when the founder should not be doing sales calls, but it isn’t simply because they don’t enjoy it.

Finally, you shouldn’t outsource tasks that need a full-time person to handle. A 40-hour a week contractor starts to look a lot like an employee to the IRS after a while. If the IRS interprets your contractor relationship as an employer/employee relationship, you could be liable for that person’s social security taxes, as well as other costs and penalties.

How to Find Outsourced Talent

The absolute best way to find outsourced talent is to look for recommendationswithin your own network. Ask your connections on LinkedIn, Facebook, and Twitter if anyone recommends a contractor for the job you are looking to outsource.

If you strike out within your own network, there are a variety of sites that have a database of individuals available for hire, everywhere from $5 to over $100/hr:

Searching through the sites above you will likely be overwhelmed with the number of people available, how do you separate the wheat from the chaff?:

First of all, start by creating a one-time job that will represent the type of work your contractor will do. If you are looking for a website designer, ask them to redesign your current homepage. If you are looking for a blog writer, ask them for an article on a given topic.

Ask the applicants to follow a random instruction when applying. For example, when posting a job on Upwork, in your job description as the applicants to start off their application with the word “tangerine” at the top to show that they read the whole job description.

Schedule a 10-min Skype call with your qualified applicants. This will not only help you see if they can show up for something on time, without technical difficulty, but also helps to weed out any communication issues that you might have further down the road.

Finally, to narrow down your final choice: pay multiple workers to complete the same job. Yes, you are essentially wasting money here, but not really. The cost of paying for one more homepage redesign pales in comparison to the cost associated with hiring the wrong person for the job.

Hopefully after these four steps the right candidate for the job will become obvious. While finding the best talent is a tedious and time-consuming process, the benefits far outweigh the due diligence work required in order to find the right person to help run your business.

Concluding Thoughts

Outsourcing work is something that many new entrepreneurs are hesitant to try, but the most successful entrepreneurs swear by.

Hiring contractors frees you up to focus on the core competencies that move your business forward, as opposed to the mundane tasks that should be left to others. In addition, hiring an expert to cover specialized areas where appropriate allows us to grow in ways that one person could not grow a company alone.

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